The credit, which reduces federal income taxes for buyers
of plug-in vehicles with two or three wheels, would help the
U.S. electric-motorcycle industry create 16,000 jobs over five
years, according to Senator Ron Wyden, an Oregon Democrat. He
included the change in a Senate proposal last year that became
part of this week’s deal to prevent automatic tax increases on
most Americans.

The electric-motorcycle credit is among tax benefits
initially described as temporary that morph into permanent
provisions benefiting a few companies, said Erich Zimmermann, a
senior policy analyst tracking transportation issues at
Taxpayers for Common Sense, a Washington watchdog group.

“We’ve had deep concerns about tax extenders,” Zimmermann
said. “They’re supposedly temporary. And here they go, on and
on.”

Wyden helped revise a more broadly available tax credit,
which expired at the end of 2011, that applied to so-called
neighborhood electric vehicles and motorcycles, said Craig
Bramscher, Ashland, Oregon-based Brammo’s chief executive
officer. He credited Wyden and Republican Representative Greg
Walden for the measure.

The credit as amended applies only to two- and three-wheeled vehicles capable of traveling at least 45 miles per hour
(72 kilometers per hour), fast enough to travel on public roads.

Golf Carts

“A whole bunch of golf carts got paid for with the tax
credit,” Bramscher said. “I don’t think that was the
intention. There were trying to clear that up for real
transportation.”

Brammo’s customers will be eligible for tax credits of as
much as 10 percent of the price of models like the $7,995
Enertia and the $18,995 Empulse R. Bramscher said the company
sells thousands of motorcycles a year and may see sales grow 20
percent to 30 percent.

“We’re ramping up right now to produce more bikes every
day,” Bramscher said. “Based on quick dealer feedback we’ve
just had this morning, it’s going to have an impact.”

Wyden got involved when constituents pointed out the
disparate tax treatment between electric cars and motorcycles,
said Keith Chu, the Oregon Democrat’s spokesman. A second Oregon
company, Eugene-based Arcimoto Inc. is also expected to sell
vehicles that qualify, Chu said.

Export Opportunity

“Electric motorcycles present a potentially major foreign
export opportunity for the U.S., so it makes sense to support a
domestic market while the industry matures,” Chu said.

Pike Research, a market intelligence and consulting company
with offices in Boulder, Colorado, and Washington, estimates
global sales for electric motorcycles and scooters will reach
18.6 million a year by 2018, according to a Dec. 31 report.

Congress is changing the tax credit to make sure the money
goes to supporting the next generation of technology, said
Genevieve Cullen, vice president of the Washington-based
Electric Drive Transportation Association.

Motorcycles are a growing part of the market, Cullen said.
They require smaller versions of the expensive battery packs
that weigh down plug-in cars like the Chevrolet Volt.

Commuting Option

Only a few companies in the U.S. make electric motorcycles.
In addition to Brammo and Arcimoto, Zero Motorcycles Inc., of
Scotts Valley, California, may benefit from the tax credit. If
the market continues to grow, bigger manufacturers like
Bayerische Motoren Werke AG and Honda Motor Co. may get in,
Bramscher said.

Zero now sells about 40 percent of its bikes overseas,
mostly in Europe, said Jay Friedland, the closely held company’s
vice president of strategy and sustainability. That may grow to
60 percent based on demand, Friedland said. The company has sold
about 2,500 motorcycles in the past five years, he said.

Market research has indicated that a credit taking $1,000
off the selling price would have a “significant” impact on
sales, he said. The company expects customers looking at its
premium $15,995 motorcycle to pay closer to $14,500.

American Jobs

“This is about creating American jobs,” Friedland said.
“We need to do a shift in transportation. The more of these
vehicles we can get on the road, whether they’re two-wheelers,
three-wheelers or four-wheelers, that’s really going to be
good.”

The revised tax credit also applies to three-wheeled
vehicles including the Alias, under development by the
California-China joint venture ZAP Jonway. It seats three people
and looks like a sports car with two regular-sized wheels in the
front and a wide tire in the back. It has a top speed of 85
miles per hour and a 100-mile range.

There is an incentive for manufacturers who want to make
car-like vehicles to stick to three wheels because the National
Highway Traffic Safety Administration regulates them as
motorcycles, meaning they get less-extensive crash testing and
safety mandates, Bramscher said.

Safety Standards

Still, motorcycle companies can run afoul of regulators.
NHTSA has accused ZAP Jonway of dragging its feet in notifying
regulators about brake defects in its 2008 Xebra, which looks
like a subcompact car except for having three wheels. Last
October, the agency took the rare step of holding a public
hearing on whether the Santa Rosa, California-based company
violated U.S. law by not fixing the vehicles.

After the hearing, regulators ordered ZAP Jonway to
repurchase the vehicles from their owners for an average cost of
$3,100 and permanently mark their titles as a “junk
automobile.” ZAP Jonway hasn’t complied with the order,
according to agency documents, and NHTSA is considering
additional enforcement options.